New TSP Roth Feature: January 2012

The Thrift Savings Plan Enhancement Act of 2009, authorized the Thrift Savings
Plan (TSP) to add a Roth 401(k) feature to the plan.

This benefit allows participants to contribute on an after-tax basis to their
TSP accounts and receive tax-free earnings when they withdraw the funds
(assuming certain criteria are met).

Under current options in the TSP, income tax is paid when funds
are withdrawn from the TSP since the original contributions were made from
pre-tax dollars.

According to the TSP, the target date for the implementation of the TSP Roth
feature is January 2012, and this benefit also applies to catch-up contributions
for participants age 50 and older.

On Dec. 21, the TSP issued guidance for the program (see link below
for full details).

Some of the basics regarding TSP Roth contributions are:

At present, the law does not allow conversions of existing TSP regular
bal¬ances to Roth balances.' If a participant elects to contribute a regular
(tax- deferred) contribution to the TSP, he or she may not request that the
contribution be changed to a Roth contribution (or vice versa) once the election
is properly processed by the agency and the contribution is deposited into his
or her TSP account. (The participant can always change his or her election for
future contributions.)

Roth contributions are made by the TSP participant on an after-tax basis
from basic pay, and may be made in addition to or in lieu of regular
contributions.

TSP Roth contributions are subject to the current elective deferral limit
and must be combined with any regular contributions in determining whether the
limit has been met.

Participants age 50 and over may elect to make Roth catch-up contributions.
All regular catch-up contributions and Roth catch-up contributions are
contributed from basic pay and count against the catch-up deferral limit.

The TSP participant's agency automatic (1%) and agency matching
contributions are always tax-deferred (as are their earnings). There is no
differentiation between matching contributions associated with regular
contributions and those associated with Roth contributions.

Roth contributions are added to regular contributions when determining the
percentage of pay being contributed for purposes of the Agency Matching
Contribution formula. Thus, the total amount of employee con-tributions (whether
regular or Roth) is used for the formula.

A participant may designate any whole percentage or whole dollar amount of
basic pay as Roth contributions. This election may be in addition to or in lieu
of an election to make regular (tax-deferred) contributions.